economics essay

History Of United Kingdom Economic Crisis Economics Essay

Published: 23, March 2015

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The largest economy in the world was Great Britain and Ireland in the United Kingdom. The Industrial Revolution was the birthplace of modern democracy. The financial and capital markets are the foundation of the capitalist economic system in the country.

During the 19th century, one quarter of the world s surface was converted by British Empire. It is using the dominant merchant navy to protect by the royal navy. It also developed a global merchant system to transport capital, people and resources to generate huge profits for their Empire and the key companies, likes the East India Company was effect India and South East Asia.

The empire was developing of driven by competition European powers and development of science and technology. In the 20th century, these two forces has been combined to lead the World War I and II. Though the United Kingdom was winning this both conflicts, it also exacted a weighty price. When the economic was devastated, British Empire came apart. Republic of Ireland withdrew from United Kingdom including Scotland, England, Northern Ireland and Wales to the union, leaving Great Britain.

America surely established itself and leading economy powers of the world during this period. Though it is still a key global player, Britain had its influence fall steadily to be other powers overtake it.

At the same period, two periods of changes that had delayed and reversed that fall. First was the Margaret Thatcher s Prime Minister was popularly broken the unions. He ushered in free market reform and helped United Kingdom to shed its mantle.

Second was New Labour s government come to power in 1997. The Prime Minister is Tony Blair. In June 2007, the Chancellor of the Exchequer Gordon Brown became the Prime Minister. From 1992 to 2008, he presided over the unbroken GDP growth and the longest period of continual development on record. The period meet with a renaissance of cultural.

History of the United Kingdom Economic from 2001 to 2007

UK Economy from 2001 to 2006

In fact, the United Kingdom experienced a twice bubble in housing and stock market in the 12th century like the Unit State, Ireland, Spain and other western countries. In this period, it was generally believed to start after the Dot Com Crash came to terminate in the 2001.

At the same way, it is characterized by the easy credits. It also became mortgage lenders to offer anything up to 125% of the loans and a mortgage of 90% to 95% for the house. It attached unsecured loan at high interest rates towards the end of this time. However, another high interest rates mortgage was Self-certification Loan. The borrower will certify their incomes level without the needing to supply the proof. So, they will become the known as liar loans for plain reasons.

The arrangements seem absurd, although the house prices more tripling in 2000 to 2006. The little government desire for omission or regulation, it is seemed like a good opinion in that time.

Then, Square Mile is still the financial capital of the world for markets and assets. It works with the global financial centres in the Frankfurt, New York, Hong Kong and Tokyo. Since the financial and residential division are the larger parts of the economic in United Kingdom than in United State. It is not surprising that the nation had impacted stricter than its Anglo-Saxon partners across to the ponds.

United Kingdom Economic in 2007

It started was well but it ended the wheel was coming off from British economic by the time. The housing prices were summit in September then it started to drop, although it still in a halfway way.

Nevertheless, United State subprime crisis made it hard for the banks with high leverage ratio to approach funds in the markets. The subprime crisis meant some of the banks had trouble to pay back the counter parties. The trust and confidence were waned the markets freeze up.

The Northern Rock is a British bank had to build the business model around the leverage and the wholesale market funds. It was unable to rollover the short-term debts. It also was forced to turn into Bank of England to be the lenders of last backup in September 2007.

The news became more famous in the public when it was a run to the bank. It worried about the deposit holders withdrawn 1 billion GBP on 14 September 2007, and a further 1 billion GBP the next Monday. The shares dropped by 32% and 40% in two days. It is forcing the United Kingdom s government guaranteed all the deposits. Those events marked the initial of the credit crunch in the United Kingdom.

After that, British s government would have been fine if it was not for the United State subprime crisis. The global economic was growing extremely while the subprime crisis hit. In United Kingdom, the economic was closed to the trend, inflation was closed to the target, the public sectors debt was fall and the unemployment remained down. United State economic was the first to slow, but the crisis directly spread to other advanced economies.

Most economists believe that United Kingdom was headed for the trouble anyway with its stock, the property bubbles and low saving rate.

United Kingdom Economy in 2008

In January 2008, Northern Rock was a British bank added into the national debts, mainly to nationalise the industry and a formal nationalisation in February 2008. Bradford & Bingley was nationalised in the year.

The financial sector was compounded by the rash mega mergers and the acquisitions. The government had to bail out the banking sector in October 2008. It was happening in the United State and Europe. It was also including the injection of the capital and underwriting share issues, debt guarantees and the short term loans. The recipients are Halifax Bank of Scotland (HBOS), Royal Bank of Scotland (RBS) and the Lloyds TSB. Government forced the merger of Lloyds TSB and HBOS into the Lloyds Group. Other limited participants had Abbey, HSBC, Barclays, Nationwide and Standard Chartered.

The GDP growth turned into negative and a technical recession was starting. Since the end of World War II, the Chancellor Alastair Darling called it was the worst economy scenario. Sterling started to collapse and lost nearly 30% against its main trading partner because the British s economy dropped.

The two little silver linings in the dark clouds have been that collapse in commodity price bringing fall in inflation. The weakness of pound was helping a position exports and the tourism for rebound than European countries. But these silver linings were more proof of economy weakness than the seeds of the economy recovery by December 2008.

United Kingdom Economic Relation

Over 200 years, India still was a British colony. It was achieving independence to the United Kingdom in 15 August 1947. In fact, India and United Kingdom's trade relations had undergone the massive change from the colonial period. They perceived to be a less developed country. In fact, India was transforming itself into the quickest growing economies of the world. However, India is the world's fourth largest economic in purchasing the powers parity terms and United Kingdom is the fourth in the GDP dollar terms.

United Kingdom remained at a second position in India's leading the trade partner till 2002. It has become India's fifth leading partner. The countries are including of China is 2nd, UAE is 3rd and Belgium is 4th.

However, India exported to United Kingdom including gems, jewellery, metal of the manufactures, the power generating equipments, the services of software, pharmaceuticals, footwear, leather and leather goods, engineering goods, rice, tea and other agricultural products like nuts and preserved fruits and vegetables.

India's import from the United Kingdom is including the power generating and telecom equipments, non-ferrous metals, gold, rough diamonds, industrial machinery and chemicals. From the United Kingdom's perspective, India was United Kingdom's 15th largest exports markets. It is United Kingdom's largest exports markets in the developing worlds. India also is the 25th largest exporter to United Kingdom among the countries. The bulk of United Kingdom's imports come from the partners.

INVESTMENT

From the investment, United Kingdom was ranked at the 5th in the total Foreign Direct Investment (FDI) was inflows to the India. Nevertheless, the FDI amounts have fall in the last 2 years from US $366 million in January 2000 to US $167 million in April 2003.

Top sectors for United Kingdom of FDI to the India were powers, oil and gas, telecoms, and service industries. More industries are cooperating in the biotech, healthcares, automotive, pharmaceuticals and ICT hi-tech areas. United Kingdom was engaged to attracting more high quality Indian industries in the knowledge. It is the sectors use to set-up in the Britain.

From the recent years, they have seen a surge of investments into United Kingdom from the India, especially in the Information Technology sectors. India also is the second largest of the investor in United Kingdom from Asia in terms of number of the projects. It also is the eight largest overall. The numeral of Indian businesses were investing in the United Kingdom has increased. 28 new companies from India had invested in the United Kingdom in 2003 and 2004.

It is bringing the total amount of Indian companies in the United Kingdom to 480 according to the Figures published by the United Kingdom Trade & Investment. In this 338 came from this Information and Communications Technology (ICT) Sectors. However, they also included the flagships for Indian ICT likes Tata Consultancy Services (TCS) and the Wipro. Reliance Infocomm's $207 million acquisition of the Flag Telecom and Wockhardt's 10.85million in the CP Pharmaceuticals were the two largest Indian investments in 2003. It was a majority of the other investments continue as in the IT sector.

On the same time, leading of Indian biotechnology companies collaborated with the clients across the Europe and United Kingdom. However, Astra Zeneca also established an R&D Centre in Bangalore. Then, GlaxoSmithKline and Ranbaxy signed the agreement about the joint research and development. The industry delegations the countries had visited each other regularly.

The leading of British oil and gas companies, likes the British Gas, Shell and Cairns Energy also announced plans to expand their operations and improved their investments in India. An increasing amount of British companies are moving to the India for setting up the IT and BPO operations.

United Kingdom presented in India is the best noticed while we are talking about the Information Technology (IT) sectors in India. It has attracted attention from other United Kingdom companies. It will reality the United Kingdom economic growing strongly and the employments situation, likes in the call centres has never been good.

OTHER ECONOMY LINKAGES

Unless the trades and investments, United Kingdom's departments of the international development (DFID) supported the India s government in its efforts to achieve the poverty decrease objectives for the government of the India's Tenth Plan and the internationally agreed of the Millennium Development Goals (MDG's). DFID spend in India for the financial year in 2005 and 2006 is expected to be 280 million.

From the institution aims to develop the strategic programmes at the national level as well as to support programmes in the four partner states, they are Andhra Pradesh, Madhya Pradesh, Orissa and West Bengal. 45% of the DFID assistance to India was estimated through the national programmes.

In these national programmes is included the District Primary Education Programme (DPEP), the health interventions (AIDS, TB, Polio) and the direct financial supported the activities of some partner agencies, likes the ADB, World Bank and UN organisations.

The trades and investment ties had been repeatedly strengthened by some bilateral interactions between the two countries. The linkage is the India-United Kingdom Round Table. It is a non-governmental body set up to make its recommendations on development for bilateral relations in all the spheres.

An agreement was signed between the India and United Kingdom named as the "The Prime Ministers' Initiative". It set out to a new strategic partnership between the India and United Kingdom among other area like education, culture and Defence Policy to strengthen bilateral economy and trade issues between the two countries.

Review of the United Kingdom Economic

United Kingdom's economy has effected badly through the global economic crisis of 2008. This country had experienced a restriction in its gross domestic product. It was trying to stop the economic from entering into a depression. United Kingdom economic review indicates that this country's economy may go due to strict pressure in 2009.

United Kingdom GDP experienced a restriction of about 0.6% in third quarter of 2008. United Kingdom gross domestic product restriction has been as high as 0.6% since 1990.

The reasons ensured to this sharp fall were lower spending by the businesses and the consumers in United Kingdom. Total gross domestic product of United Kingdom was around $19,000 billion in 2008, as per data released by EuroStat.

On the contrary, a fast review of total export and import of United Kingdom suggest that export have been significantly affected through global economic crisis. Total of the United Kingdom export in 2007 was around $320 billion.

It was approximately 10% less than the previous year export figure. Nevertheless, United Kingdom import is registered a growth of about 2% in 2007. Total of United Kingdom import amounted to around $ 451 billion in 2007.

The United Kingdom economic growth is predictions. The International Monetary Fund extrapolated that United Kingdom economic is reasonable to grow by about 1.4% in 2008. They also extrapolated that United Kingdom economic growth was around 1.1% in 2009. Both these extrapolation are indicative of a economic scenario for United Kingdom in near future.

About the strengths and weaknesses of United Kingdom economic, its area of economy strength contain lower corporation taxes, higher public sector opportunities and the favourable conditions to generate funds.

The weak area for United Kingdom economy contained higher rate of inflation and bad debts of United Kingdom banks. United Kingdom to retain a positive growth rate and it has to counter both of the problems.

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